Donald Trump Won’t Renew Iran Oil Waivers

UNITED STATES

US stocks were mixed on Thursday with the S&P and NASDAQ gaining 0.10% and 0.31% respectively while the DOW closed 0.18% lower. President Donald Trump confirmed on Twitter that he will no longer nominate Herman Cain for a seat on the Federal Reserve Board after Senate confirmation for the nomination appeared blocked. This should ease fears over the politicization of the Fed following the President’s intention to place Cain and fellow supporter Stephen Moore on the Fed board in addition to the President’s repeated attacks on Jerome Powell over policy. The yield on 10Y USTs gained 1.6bps to close at 2.559%.

The Trump administration said in a Monday statement that it won’t renew waivers that let countries buy Iranian oil without facing U.S. sanctions, in a move intended to totally cut Iran’s oil exports denying the Iranian government its principal source of income. Iran in response, according to a senior Iranian military official, has threatened to shut the Strait of Hormuz – a narrow watercourse carrying a fifth of global oil trade – if it’s prevented from using it. With forecasts of a loss of some 700,000 to 800,000 barrels a day as a result, oil has extended gains surging to a six-month high of $74.34 on Monday.

UNITED KINGDOM

Brexit talks between Tories And Labour resume today with Prime Minister Theresa May also fighting to increased pressure for her to resign from her own party. While her aim is to get a deal done the soonest possible, sources familiar with the matter say Labour leader Jeremy Corbyn seems to be in no hurry to get Brexit done something that could severely hurt May’s credibility should European Parliament elections next month be held without an approved deal. As if not enough, Brexit hardliner Nigel Farage’s Brexit party is leading opinion polls for European Parliament elections and should the party emerge victorious fears are many moderate Conservatives will be pushed into a more hard-line position further denting May’s likely support. The pound fell marginally against the dollar closing at 1.2996 while the yield ion 10Y UKTs followed suit closing at 1.208%.

EUROPEAN UNION

Facebook appears set to give in to pressure from Brussels to relax its rules on political advertising on its platform. In the aftermath of the Cambridge Analytica scandal in the 2016 US elections, Facebook was now requiring advertisers to be registered in each EU member state they want their adverts to be flighted among other measures. However, pan-EU parties had threatened to take legal action complaining that the rules will stop parties from running cross-border campaigns. The yield on 10Y DBRs was just about flat closing at -0.0293% while the Euro fell against the dollar to close at 1.123.

ASIA

Asia stocks were mixed in early morning trading with the Topix up 0.3% while the Hang Seng fell 0.1%. The CSI also continued its slump, losing 0.4% this morning following signals from Beijing officials that they are less comfortable about adding stimulus. After the CSI gained some 40% this year, the market had grown sensitive to whether the massive scale of stimulus seen in the first quarter would be maintained.

TURKEY

In an unusual sign of rebellion within the ruling party Ahmet Davutoglu, one-time President Erdogan’s handpicked successor, said the AKP must face the reality of waning public approval due to “arrogant” policies. While the former PM’s statement did not personally criticize Erdogan, it tore through policies on management of the economy and curbing of basic liberties among others. This comes as the lira tumbled some 1.9% last week after reports that the central bank used short-term borrowing to bolster its foreign-currency reserves. The financials opened stable so far this morning, although the sovereign curve weakened 12/5-37.5c on average, with longer duration underperforming.

RUSSIA

In Russia data released on Thursday showed a slowing economy as salaries stalled and incomes slumped in the first quarter. Growth was at 0.8%, below forecasts in a Bloomberg survey and well below 2.7% in the fourth quarter of 2018. The weakening economy comes on the back of a jump in inflation following a VAT increase and revised 2018 data which showed significant growth. The ruble led the gains in emerging-market currencies on Monday following the announcement on Iranian waivers gaining 0.5% to 63.75 against the dollar. RUSSIA 57 stable at high 101 levels so far after a long EU weekend.